A $10 billion deal falls through? Oracle plunges nearly 5% intraday, Musk's xAI negotiations reportedly terminated

Author of this article: Li Dan

Elon Musk's artificial intelligence (AI) startup xAI and Oracle's $10 billion server leasing agreement may fall through.

During the midday trading session on Tuesday, July 9th, Eastern Time, media reports cited multiple negotiators as saying that xAI and Oracle have terminated negotiations to expand the existing agreement to lease NVIDIA AI chips from Oracle. xAI is now planning to purchase chips to build its own AI data center in Tennessee, USA, without Oracle's involvement. xAI had previously leased 16,000 NVIDIA chips from Oracle, and even though the aforementioned negotiations have failed, the existing leasing agreement will continue to be enforced.

Some netizens commented on this news, suggesting that Oracle missed an opportunity.

After the news of the failed negotiations with xAI, Oracle's stock price rapidly declined during Tuesday's midday trading, falling to a low of $138 at one point, a drop of over 4.8% intraday. The decline later narrowed to within 4%, ending a seven-day streak of gains and falling from the closing historical high set on Monday.

The latest news on Tuesday indicates that Oracle has lost a $10 billion deal from xAI. In May this year, Wall Street News reported that media learned that xAI was close to reaching an agreement to lease Oracle AI servers for $10 billion annually for multiple years. This deal would make xAI one of Oracle's largest customers. The $10 billion transaction size is similar to deals reached by xAI competitors such as OpenAI and Anthropic with Microsoft, Amazon, and Google, among other Oracle Cloud competitors.

At that time, the media also mentioned that xAI was attempting to complete a $6 billion equity financing round to help cover the costs of cloud computing services. While the deal with Oracle has not been finalized, it indicates that xAI will need more funds to support the further development of its AI projects.

The media reports on Tuesday revealed that xAI and Oracle had been discussing leasing NVIDIA chips for xAI's supercomputer project for many years, but the negotiations had reached an impasse due to some issues. These issues include Musk's request to build xAI's supercomputer faster than Oracle expected, as well as Oracle's concerns that the preferred location for xAI's supercomputer may not have sufficient power supply.

Both Oracle and Musk have not immediately responded to the media reports.

In April, Musk revealed that xAI would need 100,000 NVIDIA H100 GPU chips to train the Grok 3.0 AI model, currently using approximately 20,000 H100 chips to train the Grok 2.0 version He hopes to achieve the goal of 100,000 GPUs by 2025, as early as the second half of next year. In May, Musk told investors that xAI plans to connect all these chips into a large computer, which he referred to as a "supercomputer factory."

Last week, xAI posted on social media, revealing photos of Musk and other xAI employees. The photos show them in what appears to be a data center filled with servers. The post did not disclose the specific location, but the president of the Greater Memphis Chamber of Commerce in Tennessee stated in June that xAI plans to build a supercomputer at a former Electrolux factory in Memphis. A spokesperson for the Greater Memphis Chamber of Commerce declined to comment.